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As candidate and now as president of Mexico, Andrés Manuel López Obrador (AMLO) has vowed to strengthen Petróleos Mexicanos (Pemex). Since taking office on December 1, 2018, AMLO’s policy decisions have made clear that Pemex will be the lead actor in the country’s energy sector. The government’s recently announced capital injections to Pemex1 and the cancellation of oil and gas auctions,2 the latter of which were the venue for companies to enter the Mexican upstream industry during the previous administration, are oriented to serve AMLO’s goals for Pemex. However, AMLO’s recent signals regarding future foreign direct investment in Mexico’s upstream raise questions about the feasibility of reversing domestic production decline, particularly if it means a concerted joint effort involving Pemex and private firms will not be pursued.
Regardless of Pemex’s influence on the domestic hydrocarbon industry, the situation in Mexico cannot be delinked from the dynamics of crude oil prices, investment flows, and production in the global arena. After all, Pemex profits from—and is affected by—its participation in international energy markets. In that vein, we analyze in this report important factors that shape the ability of oil and gas companies to weather market volatility and create value. We then consider the case of Pemex in this context, which is relevant given AMLO’s stated goals. Indeed, a best case scenario would involve a healthy and thriving national oil company in Mexico that leads to strong development of the oil and gas industry and encourages the injection of capital and expertise from multiple private companies. All things considered, we posit that key industry practices followed by international oil and gas companies, if adequately implemented in Pemex, may complement López Obrador’s energy plan to help recognize areas of opportunity for Pemex. Hence, the present discussion benefits greatly from corporate annual reports and filings that Pemex and its peer companies (BHP, BP, Chevron, Equinor, ExxonMobil, and Shell)3 submit to the U.S. Security and Exchange Commission.
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